How this number is made
A balance only shrinks when the payment is larger than that month’s interest. The rest reduces principal. An extra fixed amount every month shortens the loan and cuts the interest that would have been charged on the principal you retired early.
- Use the current balance, not the original amount.
- Use the interest rate on the account. Cards often quote APR; this treats it as a monthly rate of APR ÷ 12, which is the usual planning shortcut.
- Put the required payment and any extra you will actually send in separate fields so the savings are visible.
Formula
Each month, interest = balance × APR ÷ 12. New balance = balance + interest − payment. Repeat until the balance is gone. If payment ≤ interest, there is no payoff date.
Worked example
Twelve thousand dollars at 19.9% accrues about $199 of interest in the first month. A $350 payment reduces principal by about $151. Adding $50 makes it $201. The extra $50 is why the payoff date moves by more than the raw dollars suggest: later months charge interest on a smaller balance.
Questions
Should I pay extra on the highest rate first?
Mathematically, yes: extra dollars save the most on the highest rate. A smaller balance paid off first can be easier to stick with. This page models one account.
Do biweekly payments work the same way?
Half a monthly payment every two weeks is 26 half-payments, or 13 full payments a year instead of 12. That extra payment is the effect. This form uses a monthly extra instead.